Michigan's suit against Bay Mills was barred by tribal sovereign immunity, the U.S. Supreme Court ruled in a 5 to 4 decision.File photo

UPDATE: The article has been updated with comment from the Bay Mills tribe and attorney general's office.

LANSING — The U.S. Supreme Court dismissed the state of Michigan's lawsuit against the Bay Mills Indian Community over an off-reservation tribal casino.

Michigan's suit was barred by tribal sovereign immunity, the court ruled in a 5 to 4 decision on Tuesday.

The state of Michigan argued that Bay Mills Indian Community violated state law and its tribal-state compact in 2010 when it opened a small casino in Vanderbilt, about 10 miles north of Gaylord. The now-closed casino is about a 110 mile-drive south of the Bay Mills reservation in the Upper Peninsula.

The tribe asserted that property purchased with earnings from a land claim settlement trust becomes a tribal reserve and can be used for a casino. It also claimed sovereign immunity from the state's lawsuit.

While the court identified the casino as being off Indian lands, it ruled in favor of the sovereign immunity argument.

"… Indian tribes have immunity even when a suit arises from off-reservation commercial activity," Justice Elena Kagan wrote in the majority opinion. "Michigan must therefore resort to other mechanisms, including legal actions against the responsible individuals, to resolve this dispute."

The casino was considered a test site for larger facilities in Flint Township and Port Huron, but those plans have been in limbo.

It's unclear what the tribe plans to do with the Vanderbilt site or the other proposed casinos.

"Congress and the Supreme Court have long recognized that a state cannot interfere with an Indian tribe's sovereignty. We are gratified that the Court reaffirmed that longstanding principle today," according to a statement released by the tribe. "Bay Mills, a federally recognized tribe, depends for its livelihood on revenues from gaming activities conducted in accordance with the Indian Gaming Regulatory Act. The Court's decision affords proper deference to Congress's judgment, and it will ensure that tribes like Bay Mills can continue to fund tribal education and perform other sovereign functions."

While the court did not specifically rule on whether the Vanderbilt site is "Indian land," the majority ruling noted that the Department of Interior previously issued an opinion that the tribe's use of land trust earnings to purchase the property did not convert it into Indian territory.

Michigan Attorney General Bill Schuette focused on the fact that the court recognized other ways for the state to attempt to block the casino.

"Today the U.S. Supreme Court affirmed the state's ability to restrain the illegal expansion of tribal gaming on state lands," Schuette said in a statement. "The 5-4 decision upheld the injunctive power of states to sue tribal leaders to shut down illegal casinos, and reaffirmed the states' authority to bring criminal charges against anyone engaging in illegal gaming on state lands."

The case could have implications on the Sault Ste. Marie Tribe of Chippewa Indians' proposed casino in Lansing. Schuette, who argued that the cases are similar, this month filed a petition asking the Supreme Court to hear the Lansing casino case on its own merits.

Sault Tribe Chairperson Aaron Payment said he is reviewing the ruling to determine his next steps.

"The U.S. Supreme Court ruling sends another clear signal that the Sault Tribe is within our rights and federal law to move forward on our Lansing casino, which will create more than 1,500 good jobs for Mid Michigan, and millions of dollars in new revenues for greater Lansing and the entire state," he said in a statement.